Stop Online Piracy Act Introduced to Combat Online Piracy and Counterfeiting

This is the second in a series, discussing the two new Bills proposed in Congress to deal with online pirates and counterfeiters. (View the first article relating to the PROTECT IP Act here.)

On October 26, 2011, Representative Lamar Smith introduced the Stop Online Piracy Act (H.R. 3261) ("SOPA"). Other sponsors of the Bill upon its introduction were Ranking Member John Conyers, IP Subcommittee Chairman Bob Goodlatte, Rep. Howard Berman, Rep. Marsha Blackburn, Rep. Mary Bono-Mack, Rep. Steve Chabot, Rep. Ted Deutch, Rep. Elton Gallegly, Rep. Tim Griffin, Rep. Dennis Ross, and Rep. Lee Terry.

The Bill followed several public hearings this year alone (one in the Senate and two in the House), each focused on the problems created by unfettered counterfeiting and piracy, including by foreign web sites, of U.S. rights holders' marks and copyrighted works and aimed at crafting mechanisms to combat that significant loss in U.S. income.

SOPA proposes two additional sections that were not included in the PROTECT IP Act. First, it provides "savings clauses" that mandate that this bill should not be construed to enlarge or diminish the legal obligations or liabilities imposed by 1) the First Amendment; or 2) copyright law (Title 17 of the U.S. Code). Notably absent is a similar provision relating to trademark law (Title 15 of the U.S. Code).

Second, it provides a new mechanism to require qualifying plaintiffs seeking to initiate a private action against the piratical/counterfeiting web site to provide pre-suit notification to certain Internet intermediaries. (More on this is below, in the section on the private right of action.)

INJUNCTIONS PERMITTED

The SOPA provides for injunctions against any continued activities by an owner of a domain name used by an Internet site found to be engaging in prohibited activities. Under the Attorney General's cause of action, this site must be a "foreign infringing site" while under the private right of action, this site must be "dedicated to the theft of U.S. property." There are different tests for each type of site that must be analyzed separately. Once an order is obtained declaring the Internet site in question to qualify for action under this Bill, the order can be served upon the owner, operator or registrant of the site, but also upon certain Internet intermediaries requiring them to stop doing business with these sites.

Under the private right of action section, qualifying plaintiffs must provide pre-suit notification (which recipients are required to act on within 5 days), followed by a formal complaint and a motion for an injunction.  This pre-suit notification can only be provided to two of the four intermediaries:  Internet advertisers or payment network providers.

ATTORNEY GENERAL'S ACTION (Section 102)

The U.S. Attorney General may only obtain injunctions against "foreign infringing sites," which are: 1) "U.S.-directed sites used by users in the United States," 2) have owners/operators who: traffic in counterfeit or illicit labels, or counterfeit documentation/packaging; commit criminal copyright infringement; traffic in counterfeit goods or services; or steal trade secrets in violation of the Economic Espionage Act; and 3) would be subject to seizure if they were domestic.

Once the Attorney General obtains an injunction against a site deemed to be a foreign infringing site, it may serve the injunction order on service providers (i.e., domain name registrars), Internet search engines (called "information location tools" under the PROTECT IP Act), payment network providers (i.e., MasterCard, Visa or PayPal, called "financial transaction providers" under the PROTECT IP Act), and Internet advertising services (i.e., Google or Yahoo!) requiring that they prevent access by subscribers located within the U.S., prevent the site from being served as a direct hyperlink in a search result, refuse to process payments from users of the site, or decline to distribute advertising to U.S.-based Internet users.

PRIVATE RIGHT OF ACTION (Section 103)

The most notable difference between the PROTECT IP Act and SOPA is the pre-suit notification requirement in order to invoke a private right of action. Under SOPA, a qualifying plaintiff must provide advanced notification to the designated agent of a payment network provider or Internet advertising service before filing suit. The payment network provider and Internet advertising service then has 5 days in which to disable payment transactions from U.S. users or refuse to deliver advertising relating to the Internet site in question to U.S. users.

There is a counter-notification system that allows a defendant to accept jurisdiction in a U.S. court and then to proceed to litigation. If no counter-notification is received, the qualifying plaintiff may simply file suit against the registrant (although if he/she cannot be located, the qualifying plaintiff may take action directly against the web site in an in rem action).

Private rightsholders can obtain injunctions against either foreign or domestic sites, but may only serve the resulting court orders on payment network providers and Internet advertisers as well as the owner, operator or registrant of the domain name – and only after the notification/counter-notification process has been completed.

Some immunity is provided to insulate these Internet intermediaries from liability for certain voluntary enforcement efforts. Monetary damages against either the intermediary or the web site owner/operator/registrant are not available, and monetary sanctions are not available if an intermediary ignores the initial court order and continues doing business with the site named in the court order.

This notification provision mirrors closely § 512 of the Digital Millennium Copyright Act (DMCA), but leaves out certain safe harbors that had been carefully negotiated as part of the drafting of the DMCA over a decade ago. For this reason alone, many copyright practitioners, copyright owners, educators and businesses have opposed the introduction of SOPA, claiming that the bill as currently drafted undermines the protections that have been part of copyright law for the last decade. Some have also claimed that the notification provisions fail to impose certain safeguards that could prevent frivolous litigation or blatantly baseless claims – yet still require the intermediaries to disable access within 5 days of receipt of the notification, perhaps leading to the irreversible loss of income and consumer goodwill by a U.S.-based commercial web site engaged in legitimate operations.

ADDITIONAL PROVISIONS (Title II)

SOPA also provides that unauthorized streaming of copyrighted works qualifies as a crime under Title XVIII, and provides enhanced criminal penalties for such infringement. The Bill also contains provisions relating to inherently dangerous goods (such as military counterfeits) and counterfeit pharmaceuticals. It also mandates the appointment of additional foreign service officers to aid in the enforcement of U.S. intellectual property rights around the world.

STUDY REQUIRED (Section 106)

Under SOPA, the Register of Copyrights, working together with other agencies, is required to issue a report on "the enforcement and effectiveness of this title and on any need to amend the provisions of this title to adapt to emerging technologies." (Note that the Director of the U.S. Patent and Trademark Office is not included specifically – although participation is implied because it would be one of the "other agencies" – in the development of the study.) This report is due to the judiciary committees of both the House and the Senate within two years of the enactment of this legislation.

NOTORIOUS INFRINGERS (Section 107)

SOPA also provides that the Intellectual Property Enforcement Coordinator ("IPEC") shall "conduct an analysis of notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States." The IPEC shall "solicit" public input "and give consideration to the views and recommendations of members of the public." The IPEC shall provide the results of this analysis to the judiciary committees of both the House and the Senate within six months of enactment of this bill.

This report shall include the following:

(1) An analysis of notorious foreign infringers and a discussion of how these infringers violate industry norms regarding the protection of intellectual property.

(2) An analysis of the significant harm inflicted by notorious foreign infringers on consumers, businesses, and intellectual property industries in the United States and abroad.

(3) An examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings.

(4) An analysis of the adequacy of relying upon foreign governments to pursue legal action against notorious foreign infringers.

(5) A discussion of specific policy recommendations to deter the activities of notorious foreign infringers and encourage foreign businesses industry norms that promote the protection of intellectual property globally, including addressing—

(A) whether notorious foreign infringers that engage in significant infringing should be prohibited by the laws of the States from seeking to raise capital United States, including offering stock to the public; and

(B) whether the United States Government should initiate a process to identify designate foreign entities from a list of notorious foreign infringers that would be prohibited raising capital in the United States.

HOUSE HEARINGS PRIOR TO INTRODUCTION OF BILL 

The House of Representatives Committee on the Judiciary, Subcommittee on Intellectual Property, Competition and the Internet has held two hearings on this topic. The first was held on March 14, 2011 entitled "Promoting Investment and Protecting Commerce Online:  Legitimate Sites v. Parasites, Part I." The testifying witnesses were (hyperlinks link to prepared statements provided by each witness in advance of the hearing):

• Maria A. Pallante, then-Acting Register of Copyrights, U.S. Copyright Office
• David Sohn, Senior Policy Counsel, Center for Democracy and Technology (CDT)
• Daniel Castro, Senior Analyst, Information Technology and Innovation Foundation (ITIF)
• Frederick Huntsberry (Chief Operating Officer, Paramount Pictures). 

The second hearing (entitled conveniently "Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part II") was held on April 6, 2011. Testifying witnesses during this hearing included:

·        Hon. John Morton, Director of the U.S. Immigration and Customs Enforcement

·        Floyd Abrams, a First Amendment expert who testified on his own behalf

·        Kent Walker, Senior Vice President and General Counsel for Google

·        Christine Jones, Executive Vice President and General Counsel for the GoDaddy Group.   

Chairman Lamar Smith's prepared remarks were published at the end of the hearing. A webcast of the hearing is available on the Senate Judiciary Committee's site.

HOUSE HEARING TO CONSIDER MODIFICATIONS TO BILL

The House Committee on the Judiciary also held a third hearing to consider the Bill on November 16, 2011, which lasted about three and a half hours. The webcast is still available on the Committee on the Judiciary's web site. The witnesses were:

• Maria Pallante, Register of Copyrights, U.S. Library of Congress
• John Clark, Chief Security Officer and VP of Global Security, Pfizer
• Michael O'Leary, Senior Executive Vice President, Global Policy and External Affairs, Motion Picture Association of America (MPAA)
• Linda Kirkpatrick, Group Head, Customer Performance Integrity, MasterCard
• Katherine Oyama, Policy Counsel, Google
• Paul Almeida, President, Dept. of Professional Employees, AFL-CIO

MasterCard was thanked repeatedly for its voluntary efforts at combating these criminals. Google was frequently lambasted for what the various legislators described as Google's participation in the counterfeiting system for its own financial gain.

The overall take-away from the session was that the efforts to involve various Internet intermediaries in the enforcement of U.S. intellectual property rights were a good start. Legislators asked the panelists for recommendations of specific fixes to the current bill, noting that the more participation by affected industries or businesses in the drafting process, the better the bill would end up being. For instance, Rep. Goodlatte asked Google, through Ms. Oyama, its Policy Counsel, to work with the technology committee to help fix the bill rather than referring broadly to alleged technical problems that the bill created.

He and others lamented the broad challenges to the bill that merely complained that the bill would "break the Internet" without providing any specifics about how it would be broken so that the Congressmen could address those issue. The congressmen overwhelmingly agreed that they did not want to break the Internet, but requested specific details so that they could redraft where appropriate and avoid any disruption to service.

It remains to be seen how the bill will be amended, but it seems as if the legislators are intent on "getting it right" before the bill is enacted so that the dual goals of the bill are effectuated: 1) enforcing U.S. intellectual property rights against erosion by criminals (both foreign and domestic) and 2) ensuring that due process of law and other U.S. constitutional rights are not abrogated by the effort. At the conclusion of the hearing, Chairman Smith indicated that a new version of the bill would be introduced as soon as possible, and would take into account the testimony given during the hearing as well as other comments received to date.